HSRE Fund Oversubscribed
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JULY 16, 2008 Manulife to Buy Mellon Bank Center in LA Manulife Financial has signed a letter of intent to buy Mellon Bank Center in Los 3 Va. Offices Leased to Navy for Sale Angeles from funds operated by BlackRock Realty Advisors and Tishman Speyer for 3 Fund to Buy Austin Office Park about $308 million. The 701,000-square-foot building, at 400 South Hope Street, is nearly fully 3 Value-Added Fund Eyes ‘Core’ Deals occupied. At the $440/sf price tag, Manulife’s initial annual yield would be about 5%. The yield could rise to 6.5% if two below-market leases are replaced when they 4 GI Now in Line for LA Data Center expire in 2010 and 2012. 6 Kentucky Endowment Eyes Funds If it completes the acquisition, Toronto-based Manulife will assume a $171.5 million mortgage with a 5.32% coupon. The interest-only loan matures in 2012. 6 Harrison Street Fund Oversubscribed Cushman & Wakefield is advising the sellers — the core-plus BlackRock 6 Arden Shops Suburban LA Offices Diamond Property Fund and the value-added Tishman Real Estate Venture 6. At one point, there was talk in the market that the open-end BlackRock fund was 8 Calif. Apartment Complex on Block See MANULIFE on Page 9 8 REIT Shows Jacksonville Apartments Morgan Stanley Shops Big Houston Complex 8 Shopping Center Listed Near Dallas Morgan Stanley Real Estate is selectively shopping the massive Greenway Plaza 8 Trammell Offers Houston Apartments office complex in Houston for more than $800 million, the latest in a series of offer- ings following its takeover of Crescent Real Estate Equities last year. Working via broker Holliday Fenoglio Fowler, Morgan Stanley is talking to a handful of investors about the 4.3 million-square-foot property. The company appears to be seeking some $190/sf, or $826 million, which would be in line with THE GRAPEVINE recent sales of Class-A office properties in Houston. Morgan Stanley inherited Greenway Plaza last year via its $6.5 billion Crescent Apartment investor Empire American takeover. It intended to transfer the REIT’s office buildings and residential devel- Holdings is looking to hire a chief invest- opments to a planned $10 billion vehicle, Morgan Stanley Real Estate Fund 7 ment officer in preparation of launching Global. But property values subsequently fell, scuttling the plan and leaving its first real estate fund. The executive will Morgan Stanley stuck with the portfolio in a declining market. oversee fund raising and manage the Since then, Morgan Stanley has been seeking to whittle down its exposure. It vehicle. The Montvale, N.J., firm, headed has sold $285 million of Crescent office properties and has firm agreements to sell by Ezra Beyman, hopes to raise up to $1 See HOUSTON on Page 10 billion of equity. The fund will target dis- tressed and value-added properties across the nation. The return goal has not yet Guggenheim Mulls Step to Bolster Debt Fund been determined. Guggenheim Partners is thinking about amassing reserve capital as a backstop in case debt investments held by a $768 million fund that it operates fall in value. Mike Kelly has left Dividend Capital Total The maneuver would give Guggenheim the flexibility to pump additional equi- Realty to launch his own investment firm. ty into existing investments, rather than risk being forced to sell them at a dis- The Denver shop, Tralee Capital Partners, count. Guggenheim might also use some of the capital for new investments — will invest in distressed properties and specifically to buy loans from troubled lenders. debt, as well as recapitalizations. The Under the plan, Guggenheim would raise about $150 million of fresh capital company is backed by two unidentified from investors in its Guggenheim Structured Real Estate Fund 2. The new equity families. Kelly spent the past two years as would be placed in a “co-investment” fund. One of Fund 2’s investors, San chief acquisition officer for Dividend Bernardino County Employees, has agreed to commit $25 million if Guggenheim Capital, a Denver REIT with a $2 billion decides to proceed. New York-based Guggenheim declined to comment on the co- portfolio of property and debt invest- investment vehicle. ments. Senior vice president Greg Moran Fund 2, which closed in 2006, is fully invested in B-notes, mezzanine loans and See GRAPEVINE on Back Page See GUGGENHEIM on Page 8 July 16, 2008 Real Estate ALERT 2 $170 billion of capital markets transactions on six continents and we still keep the smallest detail in sharp focus. CB Richard Ellis provides complete debt and equity solutions and personalized advice to investors anywhere in the world. Clients leverage our market knowledge. They take advantage of our keen insights and innovative thinking. And they draw on our unparalleled resources. At CB Richard Ellis, vision meets execution. The right business partner for all your real estate needs. #1 in commercial real estate worldwide www.cbre.com 888.707.3908 July 16, 2008 Real Estate ALERT 3 Va. Offices Leased to Navy for Sale 65% stake in the property. Its partner, fund operator Blackstone Group, acquired the remaining interest in 2006 via A partnership is shopping a 95% stake in a suburban its takeover of CarrAmerica, the Washington REIT that devel- Washington office building that is fully leased to the U.S. Navy. oped the property. The stake in the 319,000-square-foot One Liberty Center, in The transaction is the largest in Austin this year. The last Arlington, Va., could attract bids of about $131 million. That comparable sale came last November, when CB Richard Ellis would value the building at roughly $138 million, or $433/sf. Investors, acting on behalf of a Middle East client, paid $150 At that price, the buyer’s initial annual yield would be 6.5%. million for the 640,000-sf Amber Oaks Corporate Center. Holliday Fenoglio Fowler has the listing. The 13-building Riata complex, which sits on a 95-acre site, The partnership tested the waters earlier this year, when is almost fully leased. Seven tenants occupy most of the space, Holliday reached out to a small cadre of investors. The price including Apple (402,000 sf), Affiliated Computer Services expectation then was about $10 million higher — translating (210,000 sf) and Janus Capital (92,000 sf). Remaining lease into a 6% cap rate. But interest was soft, and the partnership terms average five years. decided to have Holliday conduct a broader marketing effort. The property was developed in two sections, called Riata The brokerage declined to comment. Corporate Park and Riata Crossing, from 1998 to 2000. O The property has an assumable $80 million loan, with a 5.1% coupon, that matures in 2015. Value-Added Fund Eyes ‘Core’ Deals The seller — a partnership among Shooshan Co. and Fred Schnider Co., each of Arlington, and Clark Enterprises of With lenders wary of financing unstabilized real estate, Bethesda, Md. — developed the 13-story property in 2005. value-added apartment player TGM Associates is pursuing The federal government has since completed $17.3 million of properties that appear to be core plays but have upside poten- tenant improvements, including structural improvements and tial. an enhanced security system. TGM this month bought two Connecticut properties with The Office of Naval Research leases 311,000 sf until 2012 at high occupancy rates that each attracted more than a dozen $36.25/sf. It has a five-year renewal option at $43.77/sf. Most of bids, mostly from core institutional investors. the remaining space is leased by Navy Federal Credit Union until The New York firm bought the 303-unit Waterford 2012. There is also a store leased to a deli and a 569-car garage. Commons in Manchester from BlackRock Realty Advisors for The property, at 875 Randolph Street, is in the Liberty $42.7 million, or $141,000/unit. It also acquired the 160-unit Center office and residential development in the Ballston sec- Archstone Bedford in Stamford from a Tishman Speyer part- tion of Arlington, about four miles west of Washington. nership for $54 million, or $338,000/unit. TGM made the pur- The 18.8 million-sf Rosslyn-Ballston corridor was 92.2% chases via its $399 million TGM Multifamily Fund, which occupied at the end of the first quarter, according to Grubb & seeks a 14% return. Ellis. Class-A asking rents average $39.85/sf. The market had The Class-A properties appealed to TGM because they are 672,000 sf of net absorption in the first quarter. O in supply-constrained markets, paving the way for rent increases. What’s more, because TGM manages properties Fund to Buy Austin Office Park itself and oversees upgrades and renovation work, it expects to squeeze larger-than-average profits out of properties classified Fund operator Spear Street Capital has agreed to pay about as core plays. $220 million for a large office park in Austin, Texas. The strategy, which has been part of TGM’s playbook for The firm is buying the 1 million-square-foot Riata office years, has particular appeal in today’s tight lending environ- complex and two tracts of developable land. San Francisco- ment. Lenders are now much quicker to approve loans on sta- based Spear Street is acting via its second opportunity fund, bilized properties than on value-added properties, which usu- which has $325 million of equity. ally have high vacancy levels or need upgrades. Holliday Fenoglio Fowler is brokering the deal for a joint Boston-based Beacon Capital Partners may be best known venture led by New York State Teachers.